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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

 

OR

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to ___________________.

 

Commission file number: 000-55209

 

Gaucho Group Holdings, Inc.

 

(Exact name of registrant as specified in its charter)

 

Delaware   52-2158952
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

112 NE 41st Street, Suite 106

Miami, FL 33137

(Address of principal executive offices)

212-739-7700

 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock   VINO   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company
      Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of November 11, 2021, there were 9,770,414 shares of common stock outstanding.

 

 

 

 
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

PART I    
  FINANCIAL INFORMATION  
  ITEM 1. Financial Statements  
    Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 1
    Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 3
    Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 4
    Unaudited Condensed Consolidated Statement of Changes in Temporary Equity and Stockholders’ Equity (Deficiency) for the Three and Nine Months Ended September 30, 2021 5
    Unaudited Condensed Consolidated Statement of Changes in Temporary Equity and Stockholders’ Deficiency for the Three and Nine Months Ended September 30, 2020 6
    Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 7
    Notes to Unaudited Condensed Consolidated Financial Statements 9
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
  ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 35
  ITEM 4. Controls and Procedures 35
PART II    
  OTHER INFORMATION  
  ITEM 1. Legal Proceedings 36
  ITEM 1A. Risk Factors 36
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
  ITEM 3. Defaults Upon Senior Securities 37
  ITEM 4. Mine Safety Disclosures 37
  ITEM 5. Other Information 37
  ITEM 6. Exhibits 38
  Signatures 39

 

 
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2021   2020 
    (unaudited)      
Assets          
Current Assets          
Cash  $2,836,500   $134,536 
Accounts receivable, net of allowance of $215,026 and $180,941 as of September 30, 2021 and December 31, 2020, respectively   433,562    255,720 
Accounts receivable - related parties, net of allowance of $339,503 and $332,130 as of September 30, 2021 and December 31, 2020, respectively   741,495    252,852 
Advances to employees   282,204    282,508 
Inventory   1,327,572    1,172,775 
Real estate lots held for sale   59,790    139,492 
Operating lease right-of-use asset, current portion   311,925    - 
Investment   45,182    53,066 
Deposits, current   15,269    35,854 
Prepaid expenses and other current assets   602,415    196,539 
Total Current Assets   6,655,914    2,523,342 
Long Term Assets          
Accounts receivable, non-current portion, net   

1,919,914

    

-

 
Property and equipment, net   3,396,950    2,860,222 
Operating lease right-of-use asset, non-current portion   1,396,857    - 
Prepaid foreign taxes, net   664,128    519,499 
Investment - related parties   3,500,000    457 
Deferred offering costs   24,000    67,016 
Deposits, non-current   56,130    - 
Total Assets  $17,613,893   $5,970,536 

 

See notes to the condensed consolidated financial statements.

 

1
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

 

   September 30,   December 31, 
   2021   2020 
    (unaudited)      
Liabilities, Temporary Equity and Stockholders’ Equity (Deficiency)          
Current Liabilities          
Accounts payable  $457,129   $891,168 
Accrued expenses, current portion   451,278    1,401,402 
Deferred revenue   753,302    933,941 
Operating lease liabilities, current portion   263,292    - 
Loans payable, current portion   249,000    437,731 
Debt obligations   7,000    1,270,354 
Investor deposits   29,950    29,950 
Other current liabilities   130,628    131,895 
Total Current Liabilities   2,341,579    5,096,441 
Long Term Liabilities          
Accrued expenses, non-current portion   126,103    169,678 
Operating lease liabilities, non-current portion   1,470,046    - 
Loans payable, non-current portion   94,000    310,591 
Total Liabilities   4,031,728    5,576,710 
Commitments and Contingencies (Note 13)   -       
Series B convertible redeemable preferred stock, par value $0.01 per share;
902,670 shares authorized; 0 and 901,070 issued and outstanding at
September 30, 2021 and December 31, 2020, respectively
   -    9,010,824 
Stockholders’ Equity (Deficiency)          
Preferred stock, 11,000,000 shares authorized:          
Series A convertible preferred stock, par value $0.01 per share;
10,097,330 shares authorized; no shares are available for issuance
   -    - 
Common stock, par value $0.01 per share; 150,000,000 shares authorized;
8,784,618 and 5,234,406 shares issued and 8,781,249 and 5,231,037 shares
outstanding as of September 30, 2021 and December 31, 2020, respectively
   87,845    52,344 
Additional paid-in capital   120,184,675    96,951,440 
Accumulated other comprehensive loss   (11,598,452)   (11,932,801)
Accumulated deficit   (94,919,120)   (93,534,828)
Treasury stock, at cost, 3,369 shares at September 30, 2021 and December 31, 2020   (46,355)   (46,355)
Total Gaucho Group Holdings, Inc. Stockholders’ Equity (Deficiency)   13,708,593    (8,510,200)
Non-controlling interest   (126,428)   (106,798)
Total Stockholders’ Equity (Deficiency)   13,582,165    (8,616,998)
Total Liabilities, Temporary Equity and Stockholders’ Equity (Deficiency)  $17,613,893   $5,970,536 

 

See notes to the condensed consolidated financial statements.

 

2
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

                 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2021   2020   2021   2020 
                 
Sales  $2,605,158   $60,228   $3,220,557   $474,546 
Cost of sales   (210,437)   (80,995)   (650,003)   (571,621)
Gross profit (loss)   2,394,721    (20,767)   2,570,554    (97,075)
Operating Expenses                    
Selling and marketing   100,870    110,687    336,081    160,686 
General and administrative   1,370,870    859,967    3,934,500    3,342,240 
Depreciation and amortization   35,758    45,906    103,680    138,409 
Gain from insurance settlement   -    (30,240)   -    (30,240)
Total operating expenses   1,507,498    986,320    4,374,261    3,611,095 
Income (Loss) From Operations   887,223    (1,007,087)   (1,803,707)   (3,708,170)
                     
Other Expense (Income)                    
Interest expense, net   49,646    72,459    88,209    193,595 
Forgiveness of PPP Loan   -    -    (242,486)   - 
Gain on debt restructuring   -    (130,421)   -    (130,421)
Other income    (87,500)   -    (87,500)   - 
Gains from foreign currency translation   (6,130)   (14,826)   (34,991)   (35,316)
Total other (income) expense   (43,984)   (72,788)   (276,768)   27,858 
Net Income (Loss)   931,207    (934,299)   (1,526,939)   (3,736,028)
Net loss attributable to non-controlling interest   45,086    32,838    142,647    128,355 
Series B preferred stock dividends   -    (178,094)   -    (540,217)
Net Income (Loss) Attributable to Common Stockholders  $976,293   $(1,079,555)  $(1,384,292)  $(4,147,890)
                     
Earnings (Loss) Per Common Share - Basic and Diluted                    
Basic  $0.11   $(0.26)  $(0.18)  $(1.02)
Diluted  $0.11   $(0.26)  $(0.18)  $(1.02)
                     
Shares used in computing earnings per share:                    
Basic   8,658,395    4,110,303    7,530,833    4,049,059 
Diluted   8,658,395    4,110,303    7,530,833    4,049,059 

 

See notes to the condensed consolidated financial statements.

 

3
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

   2021   2020   2021   2020 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2021   2020   2021   2020 
                 
Net income (loss)  $931,207   $(934,299)  $(1,526,939)  $(3,736,028)
Other comprehensive income (loss):                    
Foreign currency translation adjustments   98,709    (17,837)   334,349    400,686 
Comprehensive income (loss)   1,029,916    (952,136)   (1,192,590)   (3,335,342)
Comprehensive loss attributable to non-controlling interests   45,086    32,838    142,647    128,355 
Comprehensive income (loss) attributable to controlling interests  $1,075,002   $(919,298)  $(1,049,943)  $(3,206,987)

 

See notes to the condensed consolidated financial statements.

 

4
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TEMPORARY EQUITY AND

STOCKHOLDERS’ (DEFICIENCY) EQUITY

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Deficiency   Interest   Equity 
   

Series B

Convertible

                       Accumulated       Gaucho Group       Total 
   Redeemable                   Additional   Other       Holdings   Non-   Stockholders’ 
   Preferred Stock   Common Stock   Treasury Stock   Paid-In   Comprehensive   Accumulated   Stockholders’   controlling   (Deficiency) 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Deficiency   Interest   Equity 
Balance - January 1, 2021   901,070   $  9,010,824    5,234,406   $  52,344    3,369   $  (46,355)  $96,951,440   $(11,932,801)  $  (93,534,828)  $     (8,510,200)  $(106,798)  $     (8,616,998)
Stock-based compensation:                                                            
Options and warrants   -    -    -    -    -    -    101,453    -    -    101,453    67,196    168,649 
Common stock and warrants issued for cash, in public offering, net of offering costs [1]   -    -    1,333,334    13,333    -    -    6,589,008    -    -    6,602,341    -    6,602,341 
Common stock and warrants issued for cash   -    -    73,167    732    -    -    438,268    -    -    439,000    -    439,000 
Common stock and warrants issued to underwriter in public offering   -    -    -    -    -    -    297,963    -    -    297,963    -    297,963 
Common stock and warrants issued upon exchange of debt and accrued interest   -    -    237,012    2,370    -    -    1,419,698    -    -    1,422,068    -    1,422,068 
Common stock issued upon conversion of Series B Convertible Preferred Stock   (901,070)   (9,010,824)   600,713    6,007    -    -    9,004,817    -    -    9,010,824    -    9,010,824 
Effect of reverse stocksplit   -    -    495    -    -    -    -    -    -    -    -    - 
Comprehensive loss:                                                            
Net loss   -    -    -    -    -    -    -    -    (1,112,851)   (1,112,851)   (27,509)   (1,140,360)
Other comprehensive
income
   -    -    -    -    -    -    -    98,980    -    98,980    -    98,980 
Balance - March 31, 2021   -    -    7,479,127    74,786    3,369    (46,355)   114,802,647    (11,833,821)   (94,647,679)   8,349,578    (67,111)   8,282,467 
Stock-based compensation:                                                            
Options and warrants   -    -    -    -    -    -    101,453    -    -    101,453    44,610    146,063 
Common stock issued to placement agent as
commitment fees
   -    -    120,337    1,208    -    -    498,792    -    -    500,000    -    500,000 
Common stock issued for cash, net of offering costs [2]   -    -    489,400    4,894    -    -    1,582,066    -    -    1,586,960    -    1,586,960 
Comprehensive loss:                                                            
Net loss   -    -    -    -    -    -    -    -    (1,247,734)   (1,247,734)   (70,052)   (1,317,786)
Other comprehensive
income
   -    -    -    -    -    -    -    136,660    -    136,660    -    136,660 
Balance - June 30, 2021   -    -    8,088,864    80,888    3,369    (46,355)   116,984,958    (11,697,161)   (95,895,413)   9,426,917    (92,553)   9,334,364 
Stock-based compensation:                                                            
Common stock issued in satisfaction of 401(k) profit
sharing liability
   -    -    8,254    82    -    -    39,455    -    -    39,537    -    39,537 
Options and warrants   -    -    -    -    -    -    101,453    -    -    101,453    11,211    112,664 
Common stock issued upon exercise of warrants   -    -    274,500    2,745    -    -    1,644,255    -    -    1,647,000    -    1,647,000 
Common stock issued for cash, net of offering costs [3]   -    -    383,000    3,830    -    -    1,308,954    -    -    1,312,784    -    1,312,784 
Common stock issued for service   -    -    30,000    300    -    -    105,600    -    -    105,900    -    105,900 
Comprehensive loss:                                                            
Net income (loss)   -    -    -    -    -    -    -    -    976,293    976,293    (45,086)   931,207 
Other comprehensive
income
   -    -    -    -    -    -    -    98,709    -    98,709    -    98,709 
Balance - September 30, 2021   -   $-    8,784,618   $87,845    3,369   $(46,355)  $120,184,675   $(11,598,452)  $(94,919,120)  $13,708,593   $(126,428)  $13,582,165 

 

[1] Includes gross proceeds of $8,002,004, less offering costs of $1,399,663 ($1,034,684 of cash and $364,979 of non-cash).
[2] Includes gross proceeds of $2,303,211, less offering costs of $716,251 ($216,251 of cash and $500,000 of non-cash).
[3] Includes gross proceeds of $1,443,243, less cash offering costs of $130,459.

 

See notes to the condensed consolidated financial statements.

 

5
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TEMPORARY EQUITY AND

STOCKHOLDERS’ DEFICIENCY

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

(unaudited)

 

  

Series B

Convertible

                       Accumulated       Gaucho Group         
   Redeemable                   Additional   Other       Holdings   Non   Total 
   Preferred Stock   Common Stock   Treasury Stock   Paid-In   Comprehensive   Accumulated   Stockholders’   controlling   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Deficiency   Interest   Deficiency 
Balance - January 1, 2020   902,670   $9,026,824    4,021,470   $40,215    3,369   $(46,355)  $91,238,518   $(12,399,833)  $(87,886,307)  $    (9,053,762)  $26,364   $    (9,027,398)
Options and warrants   -    -    -    -    -    -    103,581    -    -    103,581    -    103,581 
Comprehensive loss:                                                            
Net loss   -    -    -    -    -    -    -    -    (1,252,847)   (1,252,847)   (42,645)   (1,295,492)
Other comprehensive income   -    -    -    -    -    -    -    128,051    -    128,051    -    128,051 
Balance - March 31, 2020   902,670    9,026,824    4,021,470    40,215    3,369    (46,355)   91,342,099    (12,271,782)   (89,139,154)   (10,074,977)   (16,281)   (10,091,258)
Options and warrants   -    -    -    -    -    -    102,675    -    -    102,675    -    102,675 
Repurchase of preferred stock   (1,600)   (16,000)   -    -    -    -    -    -    -    -    -    - 
Comprehensive loss:                                                            
Net loss   -    -    -    -    -    -    -    -    (1,453,365)   (1,453,365)   (52,872)   (1,506,237)
Other comprehensive income   -    -    -